Infosys CEO Vishal Sikka’s Letter to Investors

As the first non-founder chief executive of India’s iconic IT behemoth, Vishal Sikka steered Infosys Ltd well on a bumpy road to turn around its fortunes in his first year at the helm.

Though the 48-year-old former SAP AG executive took charge of the $8.7 billion global software major on August 1, 2014, he instilled hope in the 1.76 lakh techies that their troubled company was in safe hands and had a bright future.

“It has been a year of great transition for us though the full year performance was average,” Sikka candidly admitted in his maiden letter to the company’s investors ahead of its 34th annual general meeting (AGM).

Admitting that the company faced internal issues leading to lagging growth, Sikka said high attrition rates and exit of many key executives during the fiscal 2014-15 had put tremendous pressure on its business and performance.

A whopping 37,604 techies left Infosys in 2014-15 as against 36,268 in 2013-14, resulting in net addition of 15,782 in 2015 as against 3,717 in 2014.

“There were hard-fought battles in a difficult climate in which clients’ expectations were changing, new emerging technologies were coming to market and where the landscape of (IT) services firms became more competitive,” Sikka told the 4.5 lakh investors.

A 1:1 bonus issue in October 2014 swelled the number of shareholders by 24% to 448,000 in December from 362,000 in September 2014, while the company’s board recommended another 1:1 bonus on April 24.

Signalling a departure from the era of its illustrious co-founders who built the company with their hard-earned savings over the last three decades, Sikka said the management and the employees were learning to work in a new environment and in new ways through a difficult phase.

“As I look over the last year, which has been a difficult one, I see many promising signs for the future as with learning comes the promising of renewing ourselves and pursuing new horizons,” Sikka said in the letter.

In a bid to check the rising attrition level, which shot up to a whopping 23.4% in first quarter (April-June) before Sikka took over the reigns, the company wooed its techies with a higher compensation and additional hikes in third quarter (September-December) and promotions to 25,000 to retain as many of them.

“By investing more in our employees and giving them opportunities to move up the value chain, we brought down annualized attrition to 13.4% in the fourth quarter (January-April) from 23.4% in first quarter (April-June) and the number of employees leaving the company reduced by more than half from May 2014 to March 2015,” Sikka said.

Assuring investors of higher growth, operating margins and profitability, the chief executive said the company’s revenue would grow 10-12% in constant currency for this fiscal (2015-16) as against 7.1% in 2014.

“I believe we have a promising year ahead of us in the near term. Looking beyond this year (FY 2016), our mission is to prepare the company to achieve an aspirational goal of $20 billion in revenue by calendar year 2020, with 30% operation margin, with specific targets of increasing revenue per employee to $80,000 per year,” Sikka said.

Growing at 5.6% in dollar terms, the outsourcing firm’s consolidated revenue increased to $8.71 billion in the fiscal under review (2014-15) from $8.25 billion in previous fiscal (2013-14) and operating margins to 25.9% in FY 2015 from 24% in FY 2014.

“Our strategy to achieve large-scale growth is the right one, as evident from several measures we took to improve competitiveness in winning large deals in areas such as application maintenance, software testing, infrastructure management and business process outsourcing,” Sikka pointed out.

A doctorate in computer science from Stanford University, the Silicon Valley-based Sikka infused fresh blood at executive levels by inducting at least a dozen of his former colleagues at SAP and investing substantially in the automation platform to run the software more on artificial intelligence than human ability.

“Going beyond automation, we are bringing artificial intelligence to more cognitive tasks that were not solvable by software systems, specifically, complex business problems such as airplane engine balancing through artificial neural networks,” Sikka added.